Be Careful When You Rotate

Seminal moments in equity markets are visible only in retrospect. I know of no one who has gotten on the Forbes 400 list by consistently and correctly predicting market tops and bottoms. As to those who listen to economists, it is a guarantee to become poor. The long-term accuracy of their forecasts is zero. However, I am aware of a few ship owners who have been able to time markets more often than not. They have become, discretely or indiscreetly wealthy. Their success usually comes the old-fashioned way, buying when ships are cheap and selling when they are dear.  

Investors now have such an opportunity. As the world comes out of lockdown and the arrival of working Covid-19 vaccines is likely, there will be more demand for ships. Today it was announced that Chinese exports were up 9.5% in August. The Shanghai Container Freight Index was up 5% last week, and is up 66% year over year. In the dry bulk arena, Vale on a call Wednesday reiterated confidence in ramping up iron ore volume, despite unexpected disruptions earlier in 2020 from weather and COVID-19.  Thirty percent of idled blast furnaces are being restarted. Even tankers look interesting especially for those owners with fortress balance sheets. The smartest companies are currently buying back stock. With the reappearance of contango, floating storage is on the horizon.

As importantly, equity investors are taking profits in tech and moving into more cyclical groups. I suspect as markets become more and more confident of the economic turn of the wheel, you will see industrial businesses and financials garner more interest. I can’t tell you with certainly it will be tomorrow or next week. Apple, Amazon and Microsoft are still great businesses. As to shipping, if you want to see the power of buying cheap and selling dear, next time you are in London, I would recommend you visit and enjoy the George Economou Gallery at The Tate Modern.